A Piece Of The Puzzle Missing From Lifecore Biomedical, Inc.'s (NASDAQ:LFCR) Share Price

With a price-to-sales (or "P/S") ratio of 1.9x Lifecore Biomedical, Inc. (NASDAQ:LFCR) may be sending bullish signals at the moment, given that almost half of all the Life Sciences companies in the United States have P/S ratios greater than 2.6x and even P/S higher than 6x are not unusual. However, the P/S might be low for a reason and it requires further investigation to determine if it's justified.

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View our latest analysis for Lifecore Biomedical

What Does Lifecore Biomedical's Recent Performance Look Like?

Lifecore Biomedical certainly has been doing a good job lately as it's been growing revenue more than most other companies. One possibility is that the P/S ratio is low because investors think this strong revenue performance might be less impressive moving forward. If not, then existing shareholders have reason to be quite optimistic about the future direction of the share price.

Keen to find out how analysts think Lifecore Biomedical's future stacks up against the industry? In that case, our free report is a great place to start.

Is There Any Revenue Growth Forecasted For Lifecore Biomedical?

In order to justify its P/S ratio, Lifecore Biomedical would need to produce sluggish growth that's trailing the industry.

Taking a look back first, we see that the company managed to grow revenues by a handy 7.4% last year. Ultimately though, it couldn't turn around the poor performance of the prior period, with revenue shrinking 3.5% in total over the last three years. Accordingly, shareholders would have felt downbeat about the medium-term rates of revenue growth.

Looking ahead now, revenue is anticipated to climb by 13% per year during the coming three years according to the dual analysts following the company. Meanwhile, the rest of the industry is forecast to only expand by 6.8% per year, which is noticeably less attractive.

With this information, we find it odd that Lifecore Biomedical is trading at a P/S lower than the industry. It looks like most investors are not convinced at all that the company can achieve future growth expectations.

The Final Word

It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

A look at Lifecore Biomedical's revenues reveals that, despite glowing future growth forecasts, its P/S is much lower than we'd expect. The reason for this depressed P/S could potentially be found in the risks the market is pricing in. At least price risks look to be very low, but investors seem to think future revenues could see a lot of volatility.

Before you take the next step, you should know about the 3 warning signs for Lifecore Biomedical (1 makes us a bit uncomfortable!) that we have uncovered.

It's important to make sure you look for a great company, not just the first idea you come across. So if growing profitability aligns with your idea of a great company, take a peek at this free list of interesting companies with strong recent earnings growth (and a low P/E).

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.